SR No.

INDEX

1. Business Overview of company

2. Strengths , Challenges and Risk

3. Global Crude Oil Overview

4. Indian Crude Oil Scenario

5. Government Initiatives

6. Threat

7. Opportunities

8. Financial Analysis

9. Investment Rationale

• Alphageo India, a company engaged in the niche seismic survey business of providing

seismic 2D- and 3D-based surveys for the hydrocarbon sector.The Hyderabad-based

company is the country’s largest onshore integrated seismic service provider in the

private sector and is a market leader.

• This service is for downstream oil exploration companies .

• Alphageo is one of the lowest cost service providers in the world .

• It is one of the world's largest seismic service companies.

Business of the Company

Process

Other Services

• Consultancy on 3D/4D/3C surveys

• EM and GM services API

• Reservoir data acquisition

• Reservoir analysis

• Tape transcription & digitization of hard copies of maps, seismic sections and well logs

into CGM/ SEGY/LAS formats

• Third party QC for Acquisition and Processing

• Topographic surveys with GPS / RTK

Promoters Of Alphageo

Mr. Dinesh Alla

Promoter Director ,Chairman

and Managing Director of the

Company

Mr. Balaji Sundararajan

Sr. Vice President

(SVP)-Operations

Mr. Venkatesa Perumallu

Pasumarthy

(CFO)

MS Savita Alla

Joint managing director

Subsidaries

Alphageo DMCC incorporated in Dubai Multi commodity Centre

(DMCC)

Alphageo International Limited, incorporated in Jebel Ali Free

zone Area in Dubai

Timeline

1987Incorporated 1994 1995 2000 2001

2008ONGC Rs 43.69Cr

2009HOEC,ONGC ,Essar Total: Rs 85.4 cr

20101st international contract

2011Final dividend

2011-2012

• Global : Iran which was world's 4th largest oil producer was facing economic sanctions from western nations and leaving world to explore other alternative resources.

• Domestic : The Jubliant Energy project in Manipur was facing issues due to locals who were not allowing the company to explore their land's resources. Hence leaving PBT loss of Rs 5.59 cr for Alphageo in 2011-2012.

2012-2013

• Invested 13.73 crores in cutting edge technology for data analytics

• Recieved the contract of 3D sies loop service for the first time in Mizoram

• Competed NTPC project in June 2012

• Recived 2 contracts in Myanmar and 1 within India from OIL

2013-2014

• Received 2 projects in India

• Received extension in contract of 3D Sies Loop Seismic data

2014-2015

• Completion of pending project of 2013-14 worth Rs 31.06cr

• Recieved 4 orders from Indian oil companies.

2015-2016

International Contracts :

• Recieved contract for 2D seismic data acquisition from CAOG Pte Ltd and Bashneft International

BV each in Myanmar.

Domestic Contracts:

• Recieved contract for 2D seismic data acquisition and processing in Gujarat from NTPC.

• Recieved contract for 3D seismic data acquisition in KG Basin area from ONGC worth Rs 242 cr.

• Recieved contract for 2D seismic data acquisition in Assam and Arunachal Pradesh from Oil India

Ltd worth Rs 102 cr.

• These orders from ONGC and OIL are the Largest orders recieved in past 25 years by Alphageo

covering 29,265 line km of 2D seismic data acquisition.

• Increased crew from 4 to 17

• As business was in steep mode the personnel also increased from 10 to 241 personnel.

• Company had the peak order book ever since inception of more than Rs1500 cr

• The company recieved 6 contracts of unappraised land areas of sedimentary basins from ONGC

Mumbai worth Rs 1200 cr as a part of National Seismic Programme of Government of India.

• CAPEX of 100 cr for additional equipment

2016-2017

Shareholding Pattern

Strengths• More than 25years of experience in seismic data acquisition.

• More than 60% of the orignal team is still working with Alphageo.

• More than 1300 person years of experience in multi basinal and challenging terrains.

• More than 15900 GLK of 2Dseismic survey and 5500 sq km of 3Dseismic surveys across challenging

terrains.

• Experience of working across 8 sedimentary basins in 16 Indian states and International .

• Experience of more than 51 completed projects.

• Adequate resources : equipment from reputed global suppliers, trained crew , finance, capex

• Credible Management

• Alphageo is possibly the largest seismic services company in world(ex:china and russia )in terms of

crews .It enjoys undisputed global cost leadership.

• Timeliness : have completed few projects before date of completion.

Challenges Makes Alphageo More Stronger

• Seismic Exploration contracts did not happen or no government clarity on fresh exploration.

• Largest order recieved in 2016 but at the same time inadequate largest resources needed to be

arranged in short time period

• Danger of the largest inflow of orders would destroy something they cherished.

• In 2016-17 Alphageo was required working on 17 most diversifying locations in India.

• The other challenge that they encountered during the year 2016-17 under review was completely related to ground realities of sectoral issues.

Risk • Rapid embrace of renewable energy technologies the world over on the other.

De Risk: India could report the fastest energy consumption growth among all major

economies,the rapid increase in non-fossilfuel production notwithstanding.The result is that

India’s energy consumption is expected to grow 128% by 2035.(Source:BP Energy Outlook 2035)

• The rise of electric cars has led some big players in the industry to warn of oil demand tapering.

De risk: The conventional global car fleet is increasing by 40 million a year,net of scrapping.This

alone should account for about 600,000 b/d of growth, or half the 10-year average.Besides, a

higher use in planes, freight and petrochemicals could drive consumption further.

(Source:Morgan Stanley)

• The result is that oil demand is predicted to grow by an average 0.7% per year to reach 110 million

barrels per day by 2035.

• Companies that have been allotted oil blocks may not have the financial strength to invest in seismic

survey, curtailing growth.

De-risk - Government policy of possing fines to such companies and risk of getting eliminated

from the given project.

• Reduced opportunities and increased competition could impact revenues and margins.

De Risk - The Company’s unique value proposition of superior data capturing and interpretation,

strict adherence to time lines and expertise in successfully conducting surveys in logistically and

operationally difficult terrains allows it to earn a premium. Besides, the Company’s aggressive

depreciation policy provides it with the unique advantage of pricing competitively when bidding

for new projects.

• Global oil prices were buyoant for 3 years from 2010 to 2013 which had a poor impact on Alphageo as

there was a decline in order inflow leading to losses for 3 successive years.

Global Crude Oil Industry• OPEC policy change: The share of OPEC nations is 43% of the world’s crude oil OPEC’s oil exports

represent about 60% of the total petroleum traded internationally.

OPEC agreed to cut production by 1.2 million barrels per day to 32.5 million barrels per day from 1

January 2017 (Source:Economic Times, EIA)

• Prices : In 2018 prices have started to rise as US shale production have increased and is providing at a

lower rater than OPEC countries.

• Supply: OPEC abandoned its two-year market share strategy when it agreed in late 2016 to

reduce production by 1.2 million barrels per day in the first half of 2017. Saudi Arabia agreed

to the largest reduction of 0.49 million barrels per day, while Iraq accepted a cut of 0.21

million barrels per day.The US could remain the #1 source of global oil supply till

2020.(Source:World Bank, International Energy Agency)

Source: MOP&NG

Consumption Ways

Transportation Heating Purpose

Electricity Generation

Purpose of oil consumption in India

• Balance recoverable reserves of crude oil as on 01.04.2017 are at 604.10 MMT, out of which

279.86 MMT (46%) are in offshore and 54% in onshore.

• ONGC (nomination) has the largest share of 72% in reserves of crude oil with OIL (nomination)

and PSC regime contributing 13% and 15% respectively.

• Crude Oil import dependency of India during 2016-17 was 81.68%.

• Maximum production of crude Oil (9.678 MMT) occurred in Mumbai High asset of ONGC in

2016-2017.

• Crude oil is on the top of the import

bill of India, ONGC is responsible

for meeting almost 30%

of the country’s demand for

crude oil.

Indian Crude Oil Industry

Year Crude Oil Production (MMT)

2016-2017 36.009

2015-2016 36.492(Souce : MOP&NG)

Crude oil production 2016-17

• Petroleum product production – including petrol, diesel and LPG – from indigenous crude fell one percent to 34.7 million tonne (MT) in 2016-17 while the country’s consumption of petroleum products increased by 5% to 194 MMT. (Source: PPAC)

• Production:Crude oil output fell by 2.5% to 36.01 million tonnes during April-March FY2017.

Crude oil production 2016-17

• The consumption of petroleum is increasing at a very steep rate from 3.5 MMT in

1950-51 to 158.2 in 2013-14. This is expected to reach 245 MMT in 2021-22.

• The consumption of petroleum in the world, which started as a few tonnes a year

around 160 years ago, has reached over 6965 MMT of oil equivalents per year .

• Out of the known Indian reserves of 760 MMT of Crude Oil and 1.3 Trillion Cubic

Meters of Natural Gas, only a part may be technically and economically feasible to

exploit

• Our present indigenous production is only 37.9 MMT and is less than 25% of our

annual requirement.

(source PPAC)India’s oil demand is going up by 4-4.5% each year

Crude oil production 2016-17

State-wise Crude Oil Production Trends Onshore(Thousand Metric Tonnes)

• In 2017-18 India spent $87.72 billion To buy oil from the international market ,making it the bulkiest item on the country’s import bill of $417.57 billion.

Government Initiatives• Hydrocarbon Policy 2030 North East - The Vision aims at doubling Oil & Gas production by 2030,

making clean fuels accessible, fast tracking projects, generating employment opportunities and

promoting cooperation with neighbouring countries.

The states covered include Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram,

Nagaland, Sikkim and Tripura. (source: pib.nic.in)

• Hydrocarbon Exploration and Licensing Policy (HELP) (10 March 2016)

uniform license for exploration and production of all forms of hydrocarbon,

The Open Acreage Policy will enable E&P companies select blocks from the designated area.

Under the new regime, the Government will receive a share of the gross revenue from the sale

of oil and gas without any cost linkage.

easy to administer revenue sharing model and marketing and pricing freedom for the crude

oil and natural gas produced.

marketing and pricing freedom for the crude oil and natural gas produced.

• The government also introduced a new policy for small fields called ‘Discovered Small Field (DSF) Policy bid round – 2016’ to offer better fiscal terms than the erstwhile NELP environment. (Source: ET, Livemint)

Threats

• The country’s self-sufficiency in petroleum

• products declined from 22% in 2013-2014

• to 18% in 2016-2017 due to strong consumption growth and declining domestic

production.(Source:Economic Times)

• Estimates suggest that India’s import dependency on hydrocarbons is projected to increase from

80% to 90% by 2040, leaving the country vulnerable to geopolitical developments.

(Source: MOP&NG)

• On company level : Rejection for conducting

seismic data survey by Manipur twice .

(Source : MOP&NG)

Opportunity

• India hopes to increase domestic production in a bid to reduce import dependence on fossil

fuels by 10 % to 67% by 2022.

• India’s unprecedented investment in prospecting unexplored areas is likely to greatly enhance

the exploration activity in hitherto unappraised areas.

• Around 3,000 wells have been drilled in India’s offshore basin at an average density of one well

per 146 sq km, compared with other offshore basins like US Gulf of Mexico, drilled with an

average density of one well per 14 sq km. This indicates attractive headroom in the event of a

potential discovery for onshore discoveries as well.

• With double-digit demand growth for oil set to outpace China for the third year in a row and a

recent licensing round encouraging new players, India is attracting significant foreign investment

in its effort to unlock almost US$11 billion worth of reserves and lower its reliance on imported

crude.

• The government plans to unveil a new policy for renewing and extending the lease of 28 oil and gas

blocks.

• The Cabinet Committee on Economic Affairs approval for awarding contracts for 23 onshore and

eight offshore contract areas of discovered small oil and gas fields that earlier belonged to ONGC

and Oil India Limited.

• The Ministry of Petroleum and Natural Gas announced a new ‘Marginal Fields Policy’, which aims to

bring into production 69 marginal oil and gas fields with 89 million tonnes or Rs 75,000 crore (US$

11.25 billion) worth of reserves, by offering incentives to oil and gas explorers (exemption from

payment of oil cess and customs duty on machinery and equipment).

•Increasing industrialisation.

•Rise in population and economic growth.

•Supportive FDI and domestic policies like CBM and HELP

•Huge investments planned under the Twelfth Five Year Plan by Government.

•Demand for oil is likely to increase from the ‘Make in India’ initiative -- which aims to raise the share of

manufacturing in GDP over the next few years.

•Expanding production and distribution facilities in India.

•Growing need for electrification will keep driving the need for oil and petroleum products.

•The government’s clean fuel drive, sharp anticipated growth in transport demand and air travel, and the

country’s insatiable growth for petrochemicals will act as a boon for petrol, jet fuel, LPG and naphtha.

Demand drivers

• More employement opportunity in exploration and production in oil and gas sector . Hence it will act as positive for Alphageo.

Source: MOP&NG

• World's largest oil exporter Saudi Aramco is planning to invest in refineries and petrochemicals in India

as it looks to enter into a strategic partnership with the country.

• Foreign investors will have opportunities to invest in projects worth US$ 300 billion in India, as the

country looks to cut reliance on oil imports by 10 per cent by 2022, according to Mr Dharmendra

Pradhan, Minister of Petroleum and Natural Gas, Government of India.

• State-owned Oil and Natural Gas Corporation (ONGC) has come up with the new blueprint to increase

the crude oil production by 4 million tonnes and to double its natural gas production by 2020 to curb the

country’s import dependency by 10 percent. The company will raise its crude oil production from 22.6

million tonnes in 2017-2018 to 26.42 million tonnes in 2021- 2022. (Source:IBEF org)

A new dawn is in the offing

FINANCIALS

Profit And Loss Statement

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 CAGR

Total Revenue 30.30 46.02 23.80 95.57 73.42 90.44 308.08 21.54%

EBITDA 3.70 7.22 -1.85 39.13 26.74 28.67 103.74 14.09%

EBIT -12.59 -4.21 -9.52 30.30 16.03 16.38 80.02 19.20%

PBT -13.07 -4.75 -9.97 29.59 15.20 15.67 75.88 18.59%

PAT -11.19 -5.10 -10.78 27.69 14.40 11.67 50.56 10.99%

(In Crores)

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

EBITDA 12.21 15.69 -7.77 40.94 36.42 31.70 33.67

EBIT -41.55 -9.15 -40.00 31.70 21.83 18.11 25.97

PBT -43.14 -10.32 -41.89 30.96 20.70 17.33 24.63

PAT -36.93 -11.08 -45.29 28.97 19.61 12.90 16.41

(In %)

Profit and loss Statement Margin

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

P/E -5.24 5.79 1.54 3.21 13.80 25.01 10.18

ROE(%) - - - 35.02 17.18 11.03 29.08

ROCE(%) - - - 43.27 19.06 15.10 42.45

Current Ratio 0.99 1.18 0.47 0.92 3.55 1.38 1.25

Quick Ratio 0.94 1.16 0.43 0.91 3.05 1.37 1.25

D/E 0.00 0.06 0.11 0.55 0.01 0.02 0.65

Other Financial Data

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17

Debtors Days 109.89 93.40 184.84 73.37 110.87 132.81 124.49

Inventory Days 10.07 4.91 11.90 2.75 1.17 0.90 0.84

Creditors Days 135.38 99.36 148.34 66.11 42.65 80.62 71.14

Free Cash Flows (in Cr) -13.44 -2.78 4.00 -165.61 10.40 -5.36 -38.43

Other Financial Data

Company's Future Outlook

• There will always be a reasonable pipeline of seismic services projects to bid for.

• The time has come to liberate the company from a complete dependence on seismic services; the

company intends to utilise the cash flows generated from its ongoing projects to invest in synergistic

niche businesses with sustainable prospects.

Investment Rationale FY 18

• Focus on senior recruitments and create a robust managerial tier.

• Looking at new businesses on the one hand and entering new geographies on the other.

• Company's expectation- To do minimum Rs 400 cr worth of contracts every year starting 2017-18.

• Crude Oil prices and import data.

• Tracking steps taken by OPEC and US to derisk geopolitical effects .

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